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dannyf

Going 100% Property Or Taking On Debt?

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I haven't contributed much here but been an avid reader since about 2005 when I was living in London, and after reading here remained renting and put a large percentage of my savings into gold.

Now, I managed to transfer to Miami with my company and am contemplating my future. Even though buying is possible here compared to London, I still feel the world is going to have a big shock this year with a new recession and no way to deal with it (can't lower base rate any more). I'm standing firm waiting for that to happen, but my question is about what to do afterwards.

I've always been against debt and wanted to put as much of my savings down when I finally buy, ideally 100% but if not, at least a small mortgage. But recently I'm thinking that this puts me 100% in one asset class.

My question to you all is, when the time comes, is it better to minimise debt but be totally in property, or take a bigger mortgage but be more diversified? Especially considering the differences in mortgage rules here (hand back the keys)?

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Sadly - humans need debt to forward invest. If you believe in capitalism, you have to believe in debt. I would say gold is an investment in times of total ruin - i.e you would be able to trade it for food/safety. For day to day spending, you need to invest in stocks/debt that provide a dividend, as ultimately a productive asset is the whole point of capitalism. I would suggest good quality corporate who have little debt compared to income and a high degree of return on employed capital from regular small transactions to consumers across the world - i.e non luxury goods, things that everyone needs. They are likely to retain value when the world goes barmy as well as provide you some income unlike gold (90% of returns from the stock markets are from dividends re-invested and compounded rather than actually stock picking...the wonders of compounds are amazing). Double your money every 10 years at 7% growth. http://www.moneychimp.com/features/rule72.htm

You can find these yourself...https://www.google.co.uk/finance/stockscreener

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I've been wondering the same - my conclusion is to (once the time is ready to buy) go for a small mortgage you can easily afford for diversity purposes.

For instance it's not beyond the wildest imagination to see government driven mortgage debt cancellation. Debt is also a great inflation hedge PROVIDED you fix the interest rate as long as possible. The last point isn't followed by majority UK debtors, before long they will have a sweet reminder of interest rate risk IMHO.

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